WASHINGTON, Oct 1 (Reuters) - Worried soaring oil prices could hurt the best global prospects in years, finance chiefs from wealthy nations met on Friday to try to work out what lay behind the surge and how to buffer the economic expansion.

Group of Seven finance ministers and central bankers met at the tightly guarded U.S. Treasury building over lunch and were to work through the afternoon before a dinner with Chinese counterparts that has currency reform on the menu.

The officials will set out their world-view at about 5:45 p.m. EDT (2145 GMT) in a communiqué sources said would include a call to bolster oil-market monitoring to make it easier to discern if scarce supply, hefty demand or market speculation lay behind crude's drive to record levels.

The answer to this question is critical.

It could affect policy responses big oil consumers must adopt -- higher interest rates to stem inflation or a renewed focus on finding new energy sources -- and may offer key information on how long the price rise will last.

On Friday, U.S. crude oil futures topped $50 a barrel.

RISKS RISING

"High and volatile oil prices pose a risk to the outlook, dampening consumer spending and company profitability," Britain's Chancellor of the Exchequer, Gordon Brown, warned on Friday. He said it was vital for the G7 "to improve the transparency and the efficiency of the oil market."

G7 sources said a document released on Friday by Brown laying out his calls for improved energy market data would form the basis of language on oil in the ministers' communiqué.

After the half-day formal meeting, G7 ministers will sit down with China for a working dinner billed as an historic chance to bring the Asian giant into the fold and discuss its plans to ease a peg of its yuan… to the dollar…

The G7 gathering comes ahead of weekend meetings of the International Monetary Fund and World Bank…

Ministers are seeking energy market transparency to discover if world oil supplies may be scantier than they thought in May when they urged producers to open the spigots…

Another G7 official suggested the rise in oil costs was rooted in such fundamental factors as over-estimated supplies and was not solely due to speculation.

There is "a recognition that oil resources are scarcer than was thought a few years ago," the official said. "We agree there is a need for more transparency on the potential supply of various areas."

If scarcity is the chief culprit, the oil price shock may not prove as temporary as hoped, the official said. [emphasis added]

OCTOBER 4, 2004: 0800 PDT (FTW) -- Oil has broken $50 a barrel. Financial pundits such as T. Boone Pickens have said that we will see $60 oil before we see $40 oil again (if ever). In the G7 and around the world from the Philippines, to Brunei, to Scotland, to New Zealand, to China, to Thailand, to Japan, to Britain, to the US, many nations are either urgently looking at and discussing impending economic collapse, blackouts and food shortages. Others are already experiencing blackouts, brownouts, power cutbacks, or projecting possible lethal power outages this winter. Economic concerns may very soon be pushed aside by issues of simple survival. China's food production has been plummeting for years and overall the entire planet is yielding less and less food which requires ten calories of hydrocarbon energy for every calorie eaten.

Two examples: In New Zealand, the news website stuff.co.nz reported on October 1 that the country's oil supplies were "on a knife edge". In the Philippines on September 25, the Manila Bulletin Online ran a story headlined, "Energy Chief: Gov't Working to Address looming Crisis". India has begun hoarding oil, paying above-market prices to create a "strategic petroleum reserve" like America's.

All this is happening with a current global population of six and one half billion, expected to exceed nine billion by mid-century.

For three years (and in many cases far longer) a group of dedicated men and women, recognized as being in the forefront of the movement to place Peak Oil front-and-center on the world's agenda, have endured intense resistance - personal attacks, bureaucratic "barricades," disinformation, and more - to convey one message and one message only: The peak of world oil production is at hand now. With it come the most serious questions ever to confront our species. Their names include: Colin Campbell, Kjell Aleklett, Jean Laherrère, Kenneth Deffeyes, Matthew Simmons, Richard Heinberg, Julian Darley, Barrie Zwicker, Ali Samsam Bakhtiari, Michael Klare, Adam Porter, Andreas von Bülow, Richard Duncan, Walter Youngquist, Jay Hanson, Marshall Auerback, The Electric Wallpaper film company, FTW's Dale Allen Pfeiffer, Stan Goff and me (among many others).

Recent statements by the G7 group of nations and other breaking news stories have now irrevocably placed Peak Oil on the table. The bottom line is that the G7 have admitted that demand has outpaced supply and that due to cooked books and secrecy, they really have no idea how much oil is left, or available for production (two different questions). Within months there will be no more important story on the planet. After that, and as the G7 must begin to offer explanations and answers for all mankind - let alone the soon-to-be anachronistic financial markets - we will be there, dogging every announcement with our research. And we will be demanding honest answers.

In various forms and degrees, panic may ensue. Resource wars over Peak Oil and scarcity began officially on September 11th 2001 and they are now proliferating through a multitude of "proxy" wars from Southeast Asia, to the Caucasus, to West Africa (Nigeria and Equatorial Guinea among others), to Georgia, to Chechnya.

As FTW has always insisted, the principal objective of these Peak Oil activists was to get to this point of admission sooner rather than later; openly, rather than in secret, so that all of the human race, especially that majority not concerned solely with stock portfolios, net profits, share value or return on investment could have a say in a debate which will assuredly impact everyone's chances for survival and, most importantly, the future of all the world's children.

I hope I speak for all of us when I say that whatever we have endured, it was worth it.

We were right and this can no longer be ignored. We did it. We got Peak oil on the table and we did it before the 2004 US presidential election. Now the next question is: Will either of the candidates mention it before we vote? To do so would instantly commit the entire planet to begin looking "transparently" in one degree or another for options based upon more than economic and financial considerations. As Colin Campbell, founder of the Association for the Study of Peak Oil and Gas wrote recently, "This is the end of economics."

It is my belief that the G7 already has a good idea of how dire the situation is, and are well into discussing "options" which they don't want the rest of us to know about.

For all those critics who charge that there is an abundant supply of abiotic oil, or oil produced ad infinitum from the earth's mantle we ask, "Where is it?" They have argued that we Peak Oil activists have all been shills for oil companies seeking profits and for markets seeking greater gouged returns. The G7 has just admitted that the world economy is threatened today, not tomorrow. How does it benefit oil companies or markets if no one can buy their goods and services, or if there is no power to use them with? Now is the time for these critics to produce their vast limitless energy resources, because the G7 has just admitted that everything's falling apart. (As if we hadn't noticed.) That's what these "critics" argued would happen when the time came: there would be some magic switcheroo, and a new energy source would be unveiled.

Traditional economists are cornucopians: they calculate as if markets were magical sources of goods, with no ecological limits of any kind. Oil scarcity does not exist for them because they ignore it. Abiotic oil advocates believe that petroleum can be created without ancient biomass, and that it exists in terrific abundance at depths feasible for massive extraction. Oil scarcity does not exist for them because they deny it. Both groups dismiss Peak Oil at the peril of the world community, and in doing so they protect the disastrously naïve public confidence in this doomed system - a confidence expressed in lucrative stock prices, mortgages, and futures. Perhaps these "flat earth" economists and abiotic oil partisans should shift their attacks from the Peak Oil advocates to the oil companies whose share value, it seems, they have been (wittingly or unwittingly) protecting. For those who state that throwing money at the problem will solve it, how long were you all - especially pundits like Daniel Yergin - planning to wait before proving that you were right? How many people are to die in how many wars and how many are to freeze or lose their jobs before you show the rest of us this magical energy or this limitless oil you have been assuring us was there?

One cannot materialize a hot dog in a bank vault no matter how much money is there. The earth is a bank vault and we are all collectively locked inside it.

Show us the oil! People are dying now. The G7 has done everything but state that this is just the beginning unless more oil is found. Remember that it can take three years to bring a new oil field (once found) online. Don't attack us anymore. You have said there is an easy solution. Produce it for us all, even for yourselves. For you are not immune to what is coming. We have tried to warn even you. As FTW's energy editor Dale Allen Pfeiffer once wrote to me, "Peak Oil will defend itself quite nicely."

Put up or shut up.

One simple fact has never changed. Before oil can be produced it must first be found. Global oil discoveries peaked in 1964 and have been declining for 40 years. M. King Hubbert predicted the US oil production peak to occur 40 years after US oil discoveries peaked around 1930. He was right. Last year not a single field of 500 million barrels was discovered (for the first time since the 1920s) anywhere on the planet. The world uses a billion barrels of oil every eleven and one half days. We are now roughly 40 years after the peak of global discovery. This simple arithmetic has never changed. The outcome hasn't changed either.

China, in a desperate attempt to secure oil, is looking to build a pipeline across Burma to the Indian Ocean, thereby avoiding the increasingly dangerous and volatile Straits of Malacca and South China Sea (Asia Times, Sept. 22, 2004). China is also rushing to build a pipeline from Kazakhstan eastward through Central Asia from the Caspian basin, across hostile and expansive territory, some of it close to regions occupied by the US military in Kyrgyzstan. The US has been encircling China militarily since September 12th 2001. China is also cold calling on countries from Iran, to Saudi Arabia, to Venezuela, to West Africa offering large payouts for any oil it can get. More than two years ago FTW predicted this as we described China as the "endgame" of Peak Oil. Please see:http://www.fromthewilderness.com/free/ww3/092502_endgame.html.

These developments come even as it is apparent that Russia is only going to build one pipeline from Siberia eastward and it will serve Japan, Korea, the Philippines and possibly Malaysia - instead of China. The world's second largest oil importer is projected to have more trucks and cars than the US by 2030. Its economy is still growing at about 7% a year in spite of power shortages and blackouts in Shanghai and elsewhere, which have slowed production at American, Japanese and Korean-owned plants full of outsourced labor. Like its geostrategic and economic competitors, China is desperate for oil. These are not FTW's words. Why don't you report that, Lou Dobbs?

As the Straits Times reported on October 2, 2004:

'It's the attitude of the Myanmar government. Now they agree to have discussions. Previously, they refused,' Prof Wang told the media, suggesting that Beijing had put the pipeline on its drawing board.

'China's need for oil is great and urgent. Any pipeline, any route, would be beneficial.'

Almost every nation is now in a scramble for energy. On Septmeber 14, as reported in the Independent, Tullow oil, one of Britain's largest oil companies, warned of blackouts and heating shortages this winter. Why? The North Sea fields are drying up faster than a pair of swim trunks on a hot summer day. A Times of London story the same day warned of power cuts this winter, along with shortages of heating oil. These developments prompted Britain's Chancellor of the Exchequer Gordon Brown to warn the G7 on October 1 that oil prices were a threat to global economic "recovery" (Reuters). Isn't it amazing that the financial guys never talk about survival? They only talk about growth and recovery. That's why economics and the current financial paradigm need to go the way of the Dinosaurs and Saber-toothed tigers almost immediately.

As we have said from the start, and as I conclude in my just-released book Crossing the Rubicon: The Decline of the American Empire at the End of the Age of Oil, we will change nothing at all and we will come, collectively as a species, to a sad and miserable end unless we first change the way money works. That, and nothing less, will make a sizeable difference in the outcome.

Michael C. Ruppert
October 3, 2004

[EDITOR'S NOTE: Review copies of Crossing the Rubicon have been requested by more than 120 press agencies from around the world, including the largest and most powerful. While I do not know yet what kind of reviews we will receive, I do know that the world is paying very close attention to what I have written. Although the book has not yet been officially released we have been bouncing around the upper 1% of the Amazon best-seller list with an unreleased book and have been told that this is extremely rare. As of October 3 our ranking was 180 out of more than a million titles. This is unheard of.

At present the only copies available (shipping since last week) are from the FTW web site at www.fromthewilderness.com. We have 15,000 in stock and they are going quickly. We did this because we knew that we had to control both the marketing and shipping of the book. We have studied and learned from the lessons given us by great authors like L. Fletcher Prouty, Peter Dale Scott, and Gerard Colby. New Society Publishers has announced a ship date to retail outlets (both online and in stores) of October 16th. Major outlets are indicating shipping dates varying from October 20th to November 6th (four days after the election).

This book may change the outcome of the election and I encourage you who want to understand this battle over Peak Oil and what it means for your families to get your copies today. It truly is information that may save your life. - MCR]

(In accordance with Title 17 U.S.C. Section 107, this material is distributed without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes.)

NEW YORK (Reuters) - This oil thing is just temporary, Wall Street has been figuring, and figuring and figuring.

The surge in prices is a temporary phenomenon that's lasted for two years now. But any day it's going to end. That's because one of the following short-term factors is artificially boosting prices: (Choose one) (a) the Iraq war, (b) the hurricanes, (c) Nigerian rebellion, (d) YUKOS oil company's battle with Russian President Vladimir Putin.

Or maybe the problem is something "semi-temporary," like the possibility of attacks during the U.S. political conventions or the Olympics. China's economic boom is also cited, as are the hedge funds and speculators who have been piling into oil for a short-term gain.

But increasingly the oil climb is starting to look like one, big, long arc upward that Wall Street has been slow to factor into its estimates for future earnings and stock prices.

OIL SUPPLY AND DEMAND

"The assumption has been that the price has gone up rapidly -- and therefore it must go down rapidly," said David Cooley, director of international equities for National City Investment Co. "People throw it out as a certainty that supply and demand figures don't justify this level of oil prices. But I'd be careful about putting any certainty around that view."

Oil futures hit the all-time high of $50 a barrel on the New York Mercantile Exchange this week. But some of the biggest investment houses -- including Merrill Lynch and Morgan Stanley -- have been sticking to the view that oil will return to the $30 to $40 a barrel level by next year.

There's little doubt that a decline in oil prices would be good news for stock market investors. Oil is a great nemesis for Wall Street -- the 1970s oil shocks were one of Wall Street's bleakest periods ever. Back then, it hurt economic growth and boosted inflation, and that's what Wall Street is worrying about right now.

STOCKS PULL BACK

Rallies in oil have led to quick pullbacks in stocks. But with energy prices up by 50 percent this year, Wall Street's relatively low single-digit percentage declines in most key stock indexes may not have kept up with the upheaval in the oil patch.

"The Wall Street analysts have been a little slow in revising up their estimates" of oil prices, said John Derrick, director of research at U.S. Global Investors Inc. "For a long time they've had the belief that prices will come back down. But at some point they're going to have to adjust that view."

For much of this year, oil giant Exxon Mobil Corp. (XOM.N: Quote, Profile, Research) has been the most-shorted stock among the 30 Dow Jones industrials, meaning investors are betting that its price will drop. But for the year to date, Exxon has defied skeptics and its 17 percent gain is second only to Boeing Co. (BA.N: Quote, Profile, Research) , which has been helped by military spending during Iraq war.

Soon there will be a fresh reality check for the stock market bulls who have been forecasting an oil pullback. The impact of costly oil will start to show up more in the upcoming company earnings reports, said Peter Boockvar, equity strategist for Miller Tabak & Co.

DIFFICULT EARNINGS PERIOD

"This will be one of the most difficult earnings periods we've faced in a while," said Boockvar.

In addition to oil, there will be rising costs for other commodities, Boockvar said. A spate of companies ranging from Coca-Cola Co. (KO.N: Quote, Profile, Research) to Colgate-Palmolive Co. (CL.N: Quote, Profile, Research) have already warned that they've had trouble getting consumers to pay more for their goods. And that's putting a crimp in earnings.

"If you have a limited income, and you're paying the cost of oil at $50 or more, you might decide you don't need that extra 12-pack of Coke," said Cooley.

A rise in prices at the pumps has been a key factor in the economy's soft patch, analysts agreed. Indeed, said Peter Cardillo, chief market strategist for SW Bach and Co, the economy's recent weakness has led the market to place too much importance on oil. But now, he says, amid signs that the economy is pulling out of its slowdown, investors might pull back from their day-to-day watch on the action in the oil futures pits.

The economy "can adjust to $50 oil" he argued, but it's the fear that it will go to $60 or more that's kept Wall Street on edge.

"The market wants to go higher, and it wants to start concentrating on the possibility of a stronger economy next year," Cardillo said. "Unfortunately, we have to wait and see where oil prices settle."

(In accordance with Title 17 U.S.C. Section 107, this material is distributed without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes.)

LONDON: The world's oil refiners are unimpressed by Saudi Arabia's boost to production capacity that would only swell supplies of sour, high sulphur crude while they hanker for sweet oil.

US oil prices still hovered near $50 yesterday, testimony to the indifference to Riyadh's pledge to hoist official production capacity by 500,000 barrels per day (bpd) to 11 million bpd.

"Most refiners couldn't take more sour if they tried," said one refiner, who asked not to be named.

"We have a glut of sour crude and a short supply squeeze on low sulphur crude oil and products, so extra Saudi makes no difference whatsoever," a physical oil trader said.

Riyadh's new increment, together with capacity expansions in Kuwait and Iran will add some 900,000 bpd of new sour crude capacity by year's end.

But the kingdom has made clear it will only tap its extra reserves if warranted by customer demand. Saudi Aramco's marketing plan for this month and next calls for production of 9.5m bpd.

New Saudi output would come courtesy of intensified drilling in the kingdom's oilfields, primarily new expansion projects at Abu Safah and Qatif, and yield mostly Arab Light - similar in density to North Sea Brent crude.

But analysts said it is still relatively high in sulphur and more difficult to refine into the low-sulphur products increasingly in demand for transport fuel.

"The impact on the market will be pretty negligible," said Seth Kleinman, analyst at PFC Energy in Washington. "The world is awash with sour because there is a dearth of desulphurisation capacity."

The surplus of heavy sour crude, which has lower yields of lighter products, but is rich in heavy products like fuel oil, has sent sour grades diving to record low differentials against light sweet marker grades that have hit record highs.

Saudi Arabia's latest official selling prices for sales of its Arabian Heavy crude into the US have been set at $11.30 below US light sweet benchmark West Texas Intermediate, a fall of $3.35 compared with the level for May.

Desulphurisation capacity is being increased, but so is demand for low sulphur products as specifications are changed across the globe to introduce cleaner burning fuels.

The new oil from Saudi Arabia's Qatif field will be blended into Arab Light, while that from Abu Safah is Arab Medium.

Crude quality is based on density, measured by American Petroleum Institute gravity standards and the amount of sulphur it contains.

Arab Medium and Arab Light streams have respective APIs of 29-32 degrees and 32-36 degrees but relatively high sulphur contents of about 2.5 per cent and 1.5pc, respectively.

They would not make up for any major outage from Nigeria where unrest in the oil-rich Delta region is threatening to shut production of light sweet high quality crude.

Still light Saudi oil offers more hope than heavy sours of alleviating current high oil prices, which for light sweet benchmark Brent crude and US futures have hit record highs.

"(Qatif) offers the highest near-term hope of narrowing light-heavy differentials," Deborah White, senior economist at SG Commodities, said in a research note.